Self certified mortgages (or self cert morgages or self certification mortgages) have been in existence for a while now. Their purpose was to give mortgage applicants the chance to declare their income (to self certify) without having to provide figures to support the claim. The lender did not require proof. Obviously, such applicants represented a greater risk than a standard borrower, and, as a result, self cert mortgages came with higher rates of interest.
Self certified mortages were not designed to enable borrowers to obtain larger loans by inflating their incomes. They were put in place to allow those applicants - usually freelancers or the self-employed - to have a chance of actually obtaining a mortgage.
Unfortunately the system was often abused. With the rising propety prices over the last decade, people have obtained massive self certified mortgages. This is not a problem when house prices are still rising, but now that the property market is slumping, it presents severe difficulties.
As a result of the credit crunch, there only exist a few self certified mortgage lenders, when once there were twenty or more. Those being accepted for self cert mortgages in today's economic climate are the ones with a perfect credit rating and a considerable deposit. And even if you possess those attributes, you will discover that the interest rate for self certified mortgages is exceptionally high
Friday, 20 February 2009
What are Self Certified Mortgages?
Self certified (or self cert) mortgages are mortgages for those who can't give proof of their income in the normal way. Instead of providing the lender with bank statements, payslips and other evidence of income (as is usually required), with a self certified mortgage, the lender need only declare their income. No proof is required beyond a standard credit check.
Self certified mortgages are not in place to encourgage people to be dishonest about, or exaggerate their earnings, instead they exist to allow people with irregular incomes to access mortgage products. The self-employed are the catergory of people who most benefit from self certified mortgages.
There are still requirements that a borrower must satisfy before they can benefit from a self certified mortgage - and in the current financial climate, these requirements have become more stringent.
The borrower must have a significant deposit. This used to be 10%, but is now much greater. In some cases, the lender might also request a lender reference or a landlord reference.
What's the catch? Why doesn't everyone have a self cert mortgage?
Borrowers who opt for self certified mortgages are higher risk borrowers than customers of standard mortgage products - as they don't have to provide evidence of their income. As a result, the interest rate for a self certified mortgage will be higher than a standard mortagage. Today, in the midst of the financial crisis, many banks and lenders have withdrawn their self-certified products altogether. The products which remain require the lender to possess a large deposit and have interest rates at a much higher level.
Self certified mortgages are not in place to encourgage people to be dishonest about, or exaggerate their earnings, instead they exist to allow people with irregular incomes to access mortgage products. The self-employed are the catergory of people who most benefit from self certified mortgages.
There are still requirements that a borrower must satisfy before they can benefit from a self certified mortgage - and in the current financial climate, these requirements have become more stringent.
The borrower must have a significant deposit. This used to be 10%, but is now much greater. In some cases, the lender might also request a lender reference or a landlord reference.
What's the catch? Why doesn't everyone have a self cert mortgage?
Borrowers who opt for self certified mortgages are higher risk borrowers than customers of standard mortgage products - as they don't have to provide evidence of their income. As a result, the interest rate for a self certified mortgage will be higher than a standard mortagage. Today, in the midst of the financial crisis, many banks and lenders have withdrawn their self-certified products altogether. The products which remain require the lender to possess a large deposit and have interest rates at a much higher level.
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